Report on Future Perspectives

Forecast for the Covestro Group and Covestro AG

Covestro Group

The following forecast for the 2022 fiscal year is based on the business development described in this Annual Report and takes into account the potential opportunities and risks.

Given the challenging economic conditions and a more competitive situation, the Board of Management of Covestro AG expects that overall performance in fiscal 2022 will be slightly down on the previous year. Despite that, we anticipate that demand for our products will continue to rise and we will generate a significant premium on the cost of capital.

From fiscal 2022 onward, Covestro’s management system will have four instead of the previous three components: , the previous key management indicator for growth, will be replaced with . Liquidity is measured in terms of (FOCF), and profitability in terms of (ROCE) above the (WACC). In addition, a sustainability component has been added, which takes account of selected ESG (environmental, social, governance) criteria. In the year 2022, direct and indirect (Scope 1 und 2) GHG emissions will be relevant for this component.

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Forecast for key management indicators

 

 

 

 

 

 

 

2021

 

Forecast 2022

EBITDA1

 

€3,085 million

 

Between €2,500 million and €3,000 million

Free operating cash flow (FOCF)2

 

€1,429 million

 

Between €1,000 million and €1,500 million

ROCE3 above WACC4

 

12.9% points

 

Between 5% points and 9% points

GHG emissions5 (CO2 equivalents)

 

5.2 million metric tons

 

Between 5.6 million metric tons and 6.1 million metric tons

1

EBITDA: EBIT plus depreciation, amortization, and impairment losses; less impairment loss reversals on intangible assets and property, plant and equipment.

2

Free operating cash flow (FOCF): cash flows from operating activities less cash outflows for additions to property, plant, equipment and intangible assets.

3

ROCE: ratio of the adjusted operating result (EBIT) after imputed income taxes to capital employed.

4

WACC: weighted average cost of capital reflecting the expected return on the company’s equity and debt capital. A figure of 7.0% has been taken into account for the year 2022 (2021: 6.6%).

5

Greenhouse gas emissions (Scope 1 and 2, GHG Protocol) at main production sites (responsible for more than 95% of our energy usage).

For the Covestro Group’s EBITDA, we forecast a figure of between €2,500 million and €3,000 million. The Performance Materials segment’s EBITDA is expected to be significantly down on the amount for the year 2021. In contrast, we project EBITDA to be significantly higher than the figure recorded in the year 2021 in the Solutions & Specialties segment.

The Covestro Group’s FOCF is forecast to total between €1,000 million and €1,500 million. For the Performance Materials segment, we expect FOCF to fall significantly short of the figure for the year 2021. In the Solutions & Specialties segment, however, we project FOCF to be significantly higher than the amount of the year 2021.

We anticipate that ROCE above WACC will be between 5% points and 9% points. This reflects average that is higher than in the year 2021 because the acquired Resins & Functional Materials business was included for the full year.

We anticipate that the Covestro Group’s GHG emissions, measured in CO2 equivalents, will be between 5.6 million metric tons and 6.1 million metric tons. This increase is mainly attributable to the composition of externally procured power, which is less favorable for us, and to the growth of the business.

Covestro AG

The earnings of Covestro AG, as the parent company of the Covestro Group, largely comprise the earnings of that company’s subsidiaries. As a result of the profit and loss transfer agreement with Covestro Deutschland AG, of Covestro AG is particularly impacted by that company’s income from equity investments in Germany and abroad. Due to higher equity investment income expected in fiscal 2022, Covestro AG should generate net income significantly above the level of the year 2021.

Core volume growth
Core volume growth refers to the core products in the Performance Materials and Solutions & Specialties. It is calculated as the percentage change in externally sold volumes compared with the prior year. Covestro also takes advantage of business opportunities outside its core business, for example the sale of precursors and by-products such as hydrochloric acid, sodium hydroxide solution, and styrene. These transactions are not included in core volume growth.
EBITDA/earnings before interest, taxes, depreciation and amortization
EBIT plus depreciation and amortization of property, plant, equipment, and intangible assets
FOCF/free operating cash flow
Operating cash flows (pursuant to IAS 7) less cash outflows for additions to property, plant, equipment and intangible assets
ROCE/return on capital employed
Ratio of operating result after imputed income taxes to the capital employed
WACC/weighted average cost of capital
Weighted average cost of capital reflecting the expected return on the company’s equity and debt capital
Capital employed
Capital employed is the sum of noncurrent and current assets less non-interest-bearing liabilities such as trade accounts payable.
Net income
Income after income taxes that is attributable to Covestro AG shareholders.